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Phoenix Funding, Inc. v. Krute

403 N.J. Super. 261, 958 A.2d 73 (App. Div. 2008)

FORECLOSURE; TAX SALES; INTERVENORS — The law requiring that persons seeking to redeem a tax sale certificate while a foreclosure action is pending must be a party to the action or must have intervened in the action applies even when the person is a relative or has a close personal relationship with the property owner.

An investor held a tax sale certificate on a residential property that was subsequently redeemed by the property owner’s heir after the holder filed a complaint to foreclose the right of redemption. Friends of the heir had loaned her the money to redeem. Within three months, the friends purchased the property from the heir. The investor filed a complaint for equitable relief, alleging the friends had indirectly redeemed the tax sale certificate without intervening in the action for foreclosure. The lower court dismissed the complaint on summary judgment motion filed by the friends.

The Appellate Division reversed and remanded for further proceedings. It found a genuine issue of material fact as to whether the friends of the heir indirectly redeemed the tax certificate in violation of law. The Court stated that in order to redeem a tax sale certificate while a foreclosure action is pending, the redeeming person must be a party to the action and, if not named in the complaint, must move to intervene in the action. Without the Court’s approval, such a person is not entitled to redeem a tax sale certificate. It interpreted this law to apply even when the person is a relative or has a close or personal relationship with the property owner. The Court understood the question at hand to be whether the friends redeemed the certificate by having the owner make payment for them. It concluded the question could not be resolved on motions for summary judgment.

According to the Court, the record supported a reasonable inference that the friends and the heir had an agreement to transfer title before the heir redeemed the certificate with funds borrowed from the friends. It noted that before the friends made the loan, they took steps that would be taken by a prudent investor intending to purchase the property. They had inspected the property and retained professionals to check for judgment liens and searched the title.


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